Wolfowitz to resign as World Bank president

Friday 18 May 2007 04.49 EDT
First published on Friday 18 May 2007 04.49 EDT

Paul Wolfowitz lost his ferocious battle to hang on to his job as president of the World Bank yesterday, forced to make his exit after a bitter international controversy.

Yesterday evening the bank's executive board announced that Mr Wolfowitz is to step down at the end of next month - but the board appeared to have given in to Mr Wolfowitz's demands that he be exonerated for any wrongdoing before agreeing to resign.

Officials said the bank will announce an interim head today, and immediately begin the nomination process for a new president.

Mr Wolfowitz's resignation ends a saga which convulsed the bank for weeks, after it emerged that he had engineered and concealed from senior officers an outsize pay rise for his partner, Shaha Riza, a staff member at the bank.

In a statement, the bank's board said it accepted that Mr Wolfowitz had "acted ethically and in good faith in what he believed were the best interests of the institution".

The board's statement went on to say: "A number of mistakes were made by a number of individuals in handling the matter under consideration, and that the Bank's systems did not prove robust to the strain under which they were placed."

Mr Wolfowitz said he had concluded it was in the best interests of the bank that he stand down.

"I am pleased that after reviewing all the evidence the executive directors of the World Bank group have accepted my assurance that I acted ethically and in good faith in what I believed were the best interests of the institution, including protecting the rights of a valued staff member," he said.

The nomination process for Mr Wolfowitz's replacement will immediately call into question the current arrangement, where the US government chooses the head of the World Bank and the European governments choose the head of the bank's sister institution, the International Monetary Fund.

"The US and other rich countries must now show that they are serious about good governance by allowing the next head of the Bank to be appointed based on merit through an open accountable process," Bernice Romero, advocacy director of Oxfam International, said in a statement.

The end to the crisis at the bank will come as a relief to US and European governments, as well as the institution's employees who had bridled at the installation of Mr Wolfowitz, best known as the architect of the US invasion of Iraq.

The drawn-out process of reaching a settlement was in large measure due to a dogged campaign by Mr Wolfowitz to stay on as president - despite scathing criticism from bank investigators and widespread despair among the staff at the institution he headed.

The Bush Administration also resisted moves to force Mr Wolfowitz out, viewing the campaign as a criticism of its Iraq policy, and also an attempt to remove America's prerogative to select the bank president.

Even before the resignation announcement George Bush made valedictory comments about the embattled bank president at his White House press conference with Tony Blair yesterday. Asked if it was possible for Mr Wolfowitz to continue to lead the bank, Mr Bush replied: "I regret that it's come to this."

The mechanics of Mr Wolfowitz's departure were set in motion on Wednesday evening when the board's bank devised a face-saving formula under which he would step down while shifting some of the responsibility for the pay rise - which violated bank rules - to an ethics committee.

That sharing of blame represented a retreat from the findings of an official investigation on Monday which were scathing of Mr Wolfowitz's handling of the 60,000 dollar pay rise, and accused him of putting personal interests over those of the bank.

That open hostility in Europe, and signs of wavering in support from the White House, appeared to overwhelm Mr Wolfowitz's feverish efforts to hang on to his job.